The 5 Questions We Ask Before Every Options Trade

Most options expire worthless.

Not because options are bad. Because people ask the wrong questions.

"Is this stock going up?" "What's the news?" "Should I buy calls or puts?"

These matter. But they're not enough.

After years of working with options, we realized the most successful investors don't just guess direction — they evaluate opportunity quality.

So we built a simple framework. 5 questions. Easy to understand, powerful enough to make a difference.

The 5-Pillar Framework

1. VALUE — "Are options priced fairly?"

Are options cheap, fair, or expensive right now? Think of it like checking if a stock is on sale.

We look at IV Rank, IV/HV ratio, term structure, and skew to determine whether you're getting a fair price. An IV Rank of 70% means options are more expensive than 70% of the past year — you're likely overpaying. An IV Rank of 20% means options are cheap relative to history.

When options are expensive, selling premium tends to work better. When they're cheap, buying makes more sense.

Read the full Value guide

2. SENTIMENT — "What are other investors doing?"

Are more people betting the stock goes up or down? We look at the balance of buying activity.

But we go beyond the simple put/call ratio. We check 7 different metrics: flow direction, OI skew, volume-OI alignment, conviction quality, OI momentum, smart money flow, and sector relative positioning. A single P/C ratio can't tell you if the flow is from retail lottery tickets or institutional conviction.

Read the full Sentiment guide

3. ACTIVITY — "Is something unusual happening?"

Sudden spikes in trading can signal that something is brewing — earnings, news, or big moves ahead.

We track 9 activity metrics including volume surges, OI build-up, strike concentration, multi-day persistence, and flow conviction. When activity is at 1.0x the average and OI isn't changing, there's nothing to see. When volume surges to 2-3x with concentrated strikes, someone may know something.

Read the full Activity guide

4. LIQUIDITY — "Can I get in and out easily?"

Some options have wide gaps between buy and sell prices. That hidden cost can eat into your returns.

An 11% bid-ask spread means you lose 11% the moment you enter, and again when you exit. We check spread quality, open interest depth, daily volume, order book depth, and execution quality. Stocks like SPY and AAPL have excellent liquidity. Many mid-cap stocks do not.

Read the full Liquidity guide

5. TIMING — "Is now a good time to act?"

Is there an earnings report coming? A big event? Sometimes the best move is to wait.

We track event proximity (earnings, FOMC, CPI), theta decay curves, term structure shape, and gamma risk. Buying calls two days before FOMC means risking IV crush. Waiting until after the event removes that risk.

Read the full Timing guide

Here's What It Looks Like in Practice

Each stock gets a full breakdown across all five dimensions. The radar chart summarizes everything at a glance — a well-rounded shape means conditions are favorable across the board. A lopsided shape tells you where the risks and opportunities are hiding.

Every pillar score runs on transparent sub-checks with simple pass/fail indicators. No jargon, just clear answers to the questions that matter.

From Framework to Tool

We used to check options pricing on one website, sentiment on another, and earnings calendars on a third. It was tedious and easy to miss things.

So we automated it.

Options Pilot analyzes 5,900+ optionable stocks across all 5 pillars. Every trading day.

Each stock gets:

• Simple scores from 0-100 for each pillar
• Pass/fail checks so you understand the "why"
• Plain English summaries — no confusing jargon

Why This Framework Works

Most traders only think about direction. "Will it go up or down?"

But the BEST setups combine:

• Fair pricing (not overpaying for IV)
• Favorable sentiment (flow supports your thesis)
• Meaningful activity (not trading into dead volume)
• High liquidity (tight spreads for efficient execution)
• Good timing (no imminent event risk to blindside you)

Direction is just one piece. The 5-pillar framework helps you evaluate the full picture before risking capital.

This is analysis, not advice. We help you understand the landscape — you make your own decisions.